Group Actions Vs. class actions

How does a group action differ from a class action? In class action or class arbitration, one party brings a claim in his name, both on his own behalf and on behalf of all others who are similarly situated (called the class). Parties attempting to pursue class actions are required to satisfy several procedural hurdles before being permitted to proceed on a class basis, which often results in delays and appeals. Group actions do not face these hurdles. If a lawsuit or arbitration is permitted to proceed on a class basis, and the claims are settled, there is then a procedure for preliminary approval of the proposed settlement, and for notice to be sent to absent members of the class. This process sometimes can result in protracted delays. The request for preliminary approval of the proposed settlement of the Demchak action, which was announced in 2013, resulted in objections which remain unresolved to this day. If a class settlement is approved, the result usually is binding on all other members of the class who do not opt out (elect to be excluded), or, in some cases, on other members of the class who opt-in (or elect to be included), even though they did not participate in the case. Members of the class who do not opt-out (or who opt-in) usually get to share in any recovery after deduction of attorneys fees and costs, and are bound by any releases of claims or other settlement terms. The process is largely attorney-driven, and the dollar amounts recovered by individual class members are usually small relative to the size of their claims.

In group actions and group arbitrations, on the other hand, individual claimants join together in asserting their individual, direct claims in a single action or arbitration proceeding, or sometimes file separate claims and then seek to have them consolidated and heard by the same judge or arbitration panel. In either case, the individual claimants have a direct, one-to-one attorney-client relationship, which provides the opportunity to have more direct input and participation in, and ultimate control over, the negotiation, structure and terms of any settlement, based on ground rules and governance procedures established at the outset of the case.

What are some of the advantages of group actions?

We believe that group actions offer several significant advantages to landowners over either individual actions or class actions or class arbitration claims.

First, landowners who pursue their claims on a group basis (as opposed to those who rely on class actions or class arbitration claims) will have direct, one-on-one attorney-client relationships with the attorneys who will be representing them, along with the other members of the group. As a result, landowners who participate in a group action will have the opportunity to negotiate, establish and know the terms of the engagement (including legal fees) at the outset of the case, and the opportunity to have more direct input and participation in case strategy, as well as ultimate control over the negotiation, structure, approval and terms of any settlement. This will be your action.

Second, group actions (as opposed to individual actions) allow the potentially significant costs of arbitrating or litigating claims to be shared by or spread across the other members of the group who have similar direct claims, making it economically feasible to pay for the substantial costs involved in proving your claims and damages -- costs that would not be economically feasible or practical for most individual landowners to pursue on their own. The costs required to to effectively pursue your claims - including, for example, the cost of hiring expert witnesses and paying for transcripts and videos of witness deposition, hearings, and arbitration proceedings and trial -- will be substantial. Group actions allow these costs to be divided among all of the member of the group on an agreed pro rata basis.

Third, we believe that the group direct arbitration procedure will avoid or minimize the delays that have been (and that we believe will continue to be) faced by landowners pursuing (or relying on) class arbitration claims, as a result of the novel and complex procedural issues involved, and resulting protracted procedural disputes and the appeals likely to follow.

Are there any potential disadvantages to group actions?

The concurrent representations of two or more clients by an attorney in the same matter always poses a risk of what are called concurrent conflicts of interest on the part of the attorney. To prevent and address these potential conflicts, the Pennsylvania Rules of Professional Conduct governing attorneys impose certain restrictions on an attorney's ability to concurrently represent multiple clients, as well as special requirements that must be satisfied in circumstances when concurrent representation is permitted.

Here, the most obvious potential disadvantage to a group action is what could occur if Chesapeake or any other gas company made an aggregate settlement proposal (a flat dollar amount for the entire group) which some members of the group wanted to accept while others did not. The Pennsylvania Rules of Professional Conduct prohibit a lawyer who represents two or more clients from participating in settling the claims of his clients on an aggregate basis unless each client gives informed consent, and also requires a lawyer to disclose in connection with any proposed aggregate settlement (i) the existence and nature of all the claims involved, and (ii) the participation of each person in the settlement. Without appropriate advance planning, the resulting conflict could require the lawyer to withdraw from representing any of the clients.

We address all of these issues (and more) in detail in our proposed Contingent Fee Agreement, in a manner that we believe makes sense and satisfies all of the applicable requirements of the Pennsylvania Rules of Professional Conduct. Contact us now to obtain a copy.